How much tax is withheld from an ETP in 2026-27?

On the taxable component up to the applicable cap: 32% if you are under your preservation age (60) at 30 June of the income year you are paid, or 17% if you have reached it. Anything above the cap is taxed at 47%. All three rates include the 2% Medicare levy (ATO Schedule 11, payments from 1 July 2026). The ETP cap for 2026-27 is $270,000.

What is the whole-of-income cap?

$180,000 (not indexed) less your other taxable payments for the income year, including salary, wages and unused leave paid out. It applies to golden handshakes, gratuities, pay in lieu of notice, unused sick leave, unused rostered days off and non-genuine redundancy pay, which use the smaller of the ETP cap and the whole-of-income cap. Genuine-redundancy excess, invalidity payments and compensation for unfair dismissal, harassment or discrimination only use the ETP cap.

How is an unfair dismissal settlement taxed?

Split it into its parts. Compensation for unfair dismissal is an ETP, taxed at 32% (17% from preservation age) up to the ETP cap. Unpaid wages for work already done are ordinary income taxed at your marginal rate. Unused annual and long service leave are not ETPs and are taxed under ATO Schedule 7. Ask for the deed of release to set out each amount, because your employer withholds on that basis.

How much of a redundancy payment is tax-free in 2026-27?

For a genuine redundancy, $13,598 plus $6,801 for each completed year of service (ATO, key super rates Table 20, 2026-27). The job must be abolished and you must be under Age Pension age (67). The tax-free amount is not part of the ETP; anything above it is an ETP taxed at 32% or 17% up to the $270,000 ETP cap.

ETP Tax Calculator

Work out the tax on an employment termination payment — redundancy, a settlement, pay in lieu of notice or a golden handshake — and see which parts are taxed as an ETP and which are not.

Last verified: 26 September 2026Jump to calculator ↓

An ETP is taxed at 32% under preservation age or 17% from it, up to the $270,000 ETP cap for 2026-27, and 47% above. Some ETPs are also limited by the $180,000 whole-of-income cap (ATO Schedule 11).

Date of birth*

Sets the ETP rate: 17% if you reach 60 by 30 June of the year you are paid, otherwise 32%.

Start date with this employer*

Counts completed years of service for the redundancy tax-free limit.

Termination date (and payment date)*

Why your employment ended*

ETP amounts

Redundancy or severance pay

Include pay in lieu of notice paid because of the redundancy. Tax-free up to the limit only on a genuine redundancy.

Compensation for unfair dismissal, harassment or discrimination

The compensation part of a settlement or FWC order. Only the ETP cap applies to it.

Other ETPs: gratuity, golden handshake, pay in lieu of notice, unused sick leave or RDOs

These use the smaller of the ETP cap and the whole-of-income cap.

Tax-free component your employer has told you about

Invalidity or pre-1 July 1983 service segment. Leave at $0 if you don't know.

Not ETPs (taxed differently)

Unpaid wages or back pay for work already done

Unused annual leave and leave loading

Unused long service leave

Treated as accrued after 17 August 1993. Longer service? Use the Long Service Leave Payout Calculator.

Other taxable income this financial year*

Salary and wages already paid since 1 July, not counting the amounts above. It shrinks the $180,000 whole-of-income cap.

ETP tax rates and caps for 2026-27

Payment	Cap	Under 60	60 or over	Above cap
Genuine redundancy above the tax-free limit, invalidity, compensation for unfair dismissal, harassment or discrimination	ETP cap $270,000	32%	17%	47%
Golden handshake, gratuity, pay in lieu of notice, unused sick leave, unused RDOs, non-genuine redundancy	Smaller of $270,000 or $180,000 less other taxable income	32%	17%	47%

Ages are at 30 June of the income year you are paid; preservation age is 60 for anyone born after 30 June 1964. Rates include the 2% Medicare levy. Source: ATO Schedule 11, Table A (last updated 17 June 2026).

What in a settlement is an ETP, and what isn't?

ETP: compensation for losing the job (unfair dismissal, harassment, discrimination), pay in lieu of notice, gratuities, golden handshakes, unused sick leave and RDOs, and redundancy pay above the tax-free limit.
Tax-free, not an ETP: genuine redundancy pay up to $13,598 + $6,801 per completed year of service (2026-27).
Ordinary income: unpaid wages or back pay for work already done, taxed at your marginal rate.
Schedule 7: unused annual leave, leave loading and long service leave. Flat 32% on genuine redundancy or invalidity; otherwise marginal rates for leave accrued after 17 August 1993. Longer service? Use the Long Service Leave Payout Calculator.

Estimating the compensation itself? The Unfair Dismissal Payout Calculator applies the FWC's compensation method and cap.

Sources

ATO, Schedule 11 – Tax table for employment termination payments (last updated 17 June 2026, payments from 1 July 2026): ETP cap, whole-of-income cap, Table A rates, preservation age.
ATO, Key superannuation rates and thresholds — Employment termination payments (last updated 17 April 2026): Table 17 ETP cap, Table 20 genuine redundancy limits.
ATO, Genuine redundancy payments (updated 5 June 2026). Services Australia, Age Pension age (67).
ATO, Schedule 7 – Tax table for unused leave payments on termination of employment (published 17 June 2026). Income Tax Assessment Act 1997 s82-10.

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